Changes required by IRS

[Guest Kathleen Meagher]

I recently received comments on a GUST restatement from an IRS reviewer. This one said we could not define "qualified domestic relations order" by reference to Section 414(p). I have never received this comment before, and I don't think there's any support for it, so I plan to resist, not just on principle but because the definition would probably be ridiculously long. Have any of you run into this?

More generally, it seems that the IRS reviewers are getting pickier and pickier (but not consistent) about requiring us to put provisions in the plans that really are not required. For example, one reviewer asked me to state affirmatively that the plan did not have an hours worked requirement for the top-heavy minimum benefit. The fact is that the plan does not have such a requirement (we know it's not permitted), so it seems redundant, to say the least, to make us say we don't have one. Such comments suggest that reviewers are imposing LRM requirements on our individually drafted plans .

Sorry for getting into a rant, but I just hate putting useless provisions in my nice, well-drafted plans. I'd like to hear others' experience in this regard and especially about successes in getting the Service to back off.

[davef]

I've had problems where the IRS wants us to spell out the definition of "leased employee" even though we have incorporated that definition by reference in the past and have received determination letters on the language.

I believe that the reviewers are relying on an IRS Quality Assurance Bulletin from 2000, which tells them which Code provisions can be incorporated by reference. Basically, they are taking the position that if there is no regulatory authority to incorporate by reference, then you can't do it. I was sent a copy of this Bulletin when I questioned them about the leased employee issue. If you want a copy of the Bulletin, let me know.

Funny thing is, the Bulletin says that 414(p) can be incorporated by reference and cites as the source Reg. Section 1.401(a)-13(g). However, I could not find any specific language in that regulation about incorporating by reference -- just a statement that the plan didn't need to include QDRO provisions.

[MGB]

davef,

I would very much like a copy of that bulletin. I am often in arguments over what can be incorporated by reference and what cannot.

Please let me know how I can get a copy (you can email me from the link below).

[E as in ERISA]

Are you sure you want to resist? Are you considering the consequences?

[RTK]

I have never had a request from the IRS to define QDRO, either in my individually drafted plans or my volume submitters. I have given up and now define "leased employee" in all of my documents (although it only mirrors the statute). I have been asked many times to state that the top heavy minimum contribution does not require minimum hours or minimum compensation,but have managed to avoid that change on the basis that the document properly describes who is entitled to the top heavy minimum.

As far as the consequences of resisting the IRS requests, I think the more important perspective is that the plan document is a legal instrument that participants (and others) may sue to enforce. Also, I have found most reviewers to be receptive to an explanation of why no change is necessary.

[Guest Kathleen Meagher]

Katherine--

As far as consequences of resisiting the IRS, I assume you mean denial of a determination letter. I was not planning on taking my annoyance with unnecessary plan language that far, but I do want to make a modest attempt to avoid turning our plans into restatements of the Code and regs. On the other hand, I can't expect my clients to pay for my personal peeves, so I wouldn't push this any farther than one round of correspondence.

I've been asked for a definition of "leased employee" when it was already in the definition of "Employee." I hope they just missed it the first time, and not that we must put leased employee language in a separate definition that is not used in the rest of the document.

[Everett Moreland]

The Quality Assurance Bulletin davef refers to is on the IRS website. It's the last 3 pages of the FY 2001 Employee Plans CPE on the remedial amendment period.

[Guest Remysis]

I have just gotten the same "spell out leased employee definition" comment (which we are not going to bother fight), but no comment on our incorporating the definition of QDRO by reference.